The primary purpose of this blog (Prithviraj Kothari - MD, RSBL | Bullion market blog) is to educate the masses of the current happenings in the Bullion world.
This blog contains my opinion, which is not to be construed as investment advices.
Information provided in these blogs is intended solely for informative purposes and is obtained from sources believed to be reliable

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Tuesday, 25 October 2016

AN ACTION PACKED DECEMBER: RSBL

By Mr. Prithviraj Kothari, MD, RSBL

Gold prices appear to have found a base either side of the $1,250 per ounce,
basis spot, with prices now getting some lift and silver prices are well placed
to challenge recent resistance $17.78 per ounce

On Friday, 21st October, San Francisco Fed President John Williams said at a mortgage
conference that "it makes sense to get back to a pace of gradual rate
increases, preferably sooner rather than later." His comments followed
recent hawkish talk from central bank officials including New York Fed Chief
William Dudley and Fed's vice chair Stanley Fischer, which prompted investors
to price in an interest rate increase this year.

The main concern currently is the conflicting scenario between Fed officials
like Fischer and Dudley who have been signalling a rate hike before the end of
the year, while the ECB has arguably signalled a likely extension of its asset
purchases.

The ECB kept interest rates at historic lows last Thursday, and its
President Mario Draghi kept the door open for more stimuli, effectively
quashing any speculation that the bank was poised to taper its 1.7 trillion
euro asset-buying programme.

Being only a few days before the U.S. presidential election, many analysts
are not expecting the Federal Reserve to take any concrete steps.

However, expectations for a December move jump to 75%, the highest it has been
all year as we see all the action happening in December.

As we head into what has seasonally been the best time of year for the
sector, here are a few possible major data release that could influenced gold prices during coming months.

November 4th: The Non-farm Payrolls Report (NFP) for
October will be released on this date. The gold sector usually
sells off into this report and becomes very volatile after the release as
trades are set beforehand based on the expected number of jobs created. This is
a highly anticipated report as the results will be heavily factored into the
Fed’s decision process of whether or not to raise interest rates in December.
The market is factoring in a 70% chance of a quarter point raise on December
14th as of this post.

November 8th: The US election could very well be a major promoter
as during the last Presidential Debate, Donald Trump made accusations of the
election possibly being rigged against him. He has also stated if defeated, he
will not commit to accepting the outcome, stating “I
will tell you at the time”. This is a very dangerous statement and could
easily trigger violence after the outcome. Also, if victorious, the decision
could very well cause a “Brexit” type response in the gold sector as Trump is
the anti-establishment candidate.

December 2nd: The release of the final NFP report before
the highly anticipated last Federal Reserve Open Market Committee (FOMC)
meeting of the year will be released . This could possibly be the
deciding factor on whether or not Fed chairwoman Janet Yellen decides to raise
rates this year.

December 14th: On this date the market will finally find
out the answer to the question of, “will she, or won’t she”. If the Fed decides
to raise rates at the conclusion of the December 13-14 FOMC meeting, the gold
sector could initially sell off as it did last December. This could be a buying opportunity as rising rates have historically been
bullish for gold as we saw back in the late 1970’s when former Fed chair Paul
Volcker raised rates to over 20%. During this time gold had the largest bull
market in history as it soared from $105 in September, 1976 to $850 in January,
1980. Also, in December of last year after 7 years of zero rates, the Fed
finally decided to raise rates a quarter point.

There are a lot of major U.S. reports coming and if the data is positive
then there is no reason why the U.S. dollar can’t go higher and that could hurt
gold. So as the world waits the month of December for its Christmas Celebration,
the financial markets await the same month as a lot of action is bound to take
place.

The primary purpose of this article by Mr. Prithviraj Kothari is to
educate the masses of the current happenings in the Bullion world.